British house prices rose
at their slowest annual rate in nearly two years in May, as growth continued to
moderate after double-digit increases in the middle of 2014, figures from
mortgage lender Nationwide showed on Wednesday.

Nationwide said house prices in May were 4.6% higher than a year
before, the smallest annual increase since August 2013 and down from a rate of
5.2% in April.

House price inflation hit a peak of 11.8% in June last year, but
eased as regulatory restrictions on mortgage lending took effect, and
Nationwide said cash buyers now accounted for a record 38% of purchases.

Nationwide said it
expected house price rises to average 4% a year over the long term, in line
with pre-crisis rates of wage growth, assuming sufficient homes are built.
"However, much will depend on supply side developments. In recent years
the rate of building activity has remained well below that required to keep up
with population growth," Nationwide chief economist Robert Gardner said.

Last month alone, house
prices rose 0.3% compared with a 1.0% increase in April, in line with average
forecasts in a Reuters poll of economists.

May saw Prime Minister David Cameron's Conservative Party
unexpectedly win an outright parliamentary majority in a national election. The
Conservatives want to boost falling rates of home ownership, but critics say
they are not doing enough to boost the supply of homes alongside stoking
demand.

Growth among Britain's
housebuilders picked up in May, a survey from Markit/CIPS showed on Tuesday.

Many economists expect house prices to pick up more rapidly
after the slowdown in recent months. Also on Tuesday, figures from the Bank of
England showed the biggest jump in the number of mortgages being approved in
over six years, taking April's total to the highest in 14 months.

"There are signs of an underlying firming in house
prices," IHS Global Insight economist Howard Archer said. "Activity
will benefit from largely favourable fundamentals and reduced uncertainty
following the decisive general election result."

A poll of economists by Reuters published on Tuesday showed that
on average, economists expect house prices to rise by 6% this year and 5% in
2016, up sharply from forecasts they made three months ago.

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